Bitcoin Halving: A Deep Dive into the Mechanism that Drives Bitcoin’s Scarcity

By Leah Abigail Permata Bachtiar & Kamal Husein Darmawan

In the realm of cryptocurrencies, Bitcoin stands as a towering figure, renowned for its revolutionary decentralized architecture and its finite supply of 21 million coins. This scarcity, a cornerstone of Bitcoin’s economic design, is safeguarded through a mechanism known as the Bitcoin halving. At the heart of the halving lies a predetermined event embedded within Bitcoin’s protocol that occurs approximately every four years. This event, the halving, entails a deliberate reduction in the block reward by half which is the amount of Bitcoin awarded to miners for successfully verifying transactions and adding new blocks to the blockchain.

Bitcoin halving serves a crucial purpose in maintaining Bitcoin’s scarcity. By periodically reducing the block reward, the halving ensures that the influx of new Bitcoins into circulation is gradually slowed down. This restricted release rate contributes to Bitcoin’s inherent scarcity, which is a key component of its value proposition as a deflationary asset. As the supply of bitcoin decreases over time, the value of the remaining Bitcoin increases, making it a more alluring asset for investors. Furthermore, the halving plays a role in maintaining the stability and security of the Bitcoin network.

Since its launch, Bitcoin has experienced three halvings. Prior to 2012, the reward for each block in the chain mined was 50 BTC. After the first halving that occurred on November 28, 2012, the value of each block mined was cut in half to 25 BTC. The second halving occurred on July 9, 2016 which halved the value again to 12.5 BTC. The most recent halving transpired on May 11, 2020 that dropped the amount to 6.25 BTC per block. As of December 5, 2023, the Bitcoin network reached 819,817 blocks according to The next halving will happen at block 840,000 between April and May 2024.

As Bitcoin approaches the fourth halving, slated for 2024, the cryptocurrency community is buzzing with anticipation. While predicting the exact impact on price is challenging, the halving is widely regarded as a significant event that could shape the future trajectory of Bitcoin. The forthcoming halving is expected to witness a 50% reduction in the block reward, from 6.25 BTC to 3.125 BTC, further intensifying Bitcoin’s scarcity and potentially triggering another significant price surge. However, it is crucial to note that market dynamics and inflation rate can also play a role in determining the price trajectory following the halving.

The dynamics of the cryptocurrency’s supply and demand are directly by Bitcoin halving. According to the law of supply and demand, a shortage in supply often drives up the price of a good or service. Driven by the halving mechanism, Bitcoin’s supply trajectory undergoes a periodic reduction, shaping the economic landscape of the cryptocurrency. Halvings effectively curtail the supply of new BTC, diminishing its availability in the market. Following its first halving in 2012, Bitcoin’s price surged from $12.35 to $127 over the span of 150 days. Likewise, the second halving event in 2016 witnessed a similar price appreciation, with Bitcoin rising from $650.53 to $758.61 within the next 150 days. The halving day of 2020 marked a trading price of $8,821.42 for Bitcoin, which soared to a whopping $10,943 within 150 days.


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